Trade gap grows as manufacturing dips

I am City A.M's deputy editor, having joined the newsroom in late 2010 as an economics reporter.

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Julian Harris

A WIDENING trade gap and weak manufacturing figures provided gloomy news for the economy yesterday, yet a leading think tank said that GDP bounced back in the three months to July.

The economy grew by 0.6 per cent in the three months to July, the National Institute for Economic and Social Research (NIESR) calculated – up from official figures that showed just 0.2 per cent growth in the three months to June.

Yet while “special factors” in April such as the royal wedding and a cluster of bank holidays were partly blamed for the sluggish 0.2 per cent expansion, it also “flatters the rate of growth in the three months to July”, NIESR explained.

Meanwhile, official data showed that the country’s trade deficit grew to £4.5bn in June, from £4bn in May.

The visible trade deficit with countries outside the European Union spiked to £5.7bn, from £5.1bn in May.

The widening trade deficit is likely to disappoint the government and Bank of England, which have been relying on strong export-driven growth in manufacturing in 2011 to fill the gap created by slower government spending and belt-tightening by consumers.

In Germany. the trade surplus narrowed to €11.5bn in June, from €12.9bn in May. German exports fell by 1.2 per cent in June, compared to the previous month.

UK manufacturing shrank by 0.4 per cent in June, separate figures from the Office for National Statistics (ONS) revealed yesterday.

A two per cent jump in utilities output prevented the wider industrial production figure from dipping – the index of production was flat on the previous month, yet still 1.6 per cent down in the second quarter, compared with the first.